Hannover Re, the fourth largest global reinsurer, expects to see stability in prices and conditions overall for the treaty renewals as at 1 January 2019. While improvements should be possible under loss-impacted programmes,covers that were spared any losses have reached the minimum level from a technical standpoint.
Ultimately, though, when it comes to determining prices it still remains to be seen how the major loss situation for 2018 ends up, how large losses from the previous year continue to develop, how inflation turns out and whether the run-off results from reserves in the US casualty market deteriorate.
Merely moderate rate increases overall have so far emerged out of the price negotiations within the year.
In the case of natural catastrophe business, which had been hard hit in the previous year, more appreciable mark-ups were nevertheless recorded for loss-impacted treaties.
All in all, the rate quality in the reinsurance market is slightly improved year-on-year, albeit remaining on a low while still adequate level.
"The further development of the loss amounts from last year's hurricanes as well as the minimal large losses incurred in the current year to date will be crucial in determining prices in property and casualty reinsurance", CEO Ulrich Wallin commented during a press conference in Monte Carlo.
"The lower the strains from catastrophe losses turn out to be this year, the more difficult it will be to push through requisite additional price increases in the coming year. Nevertheless, we are seeing strong demand and hence rather favourable opportunities for growth in certain segments." he said.
Hannover Re anticipates increasing demand in, among other areas, covers for cyber risks as well as solutions designed to provide solvency relief under structured reinsurance.
For the treaty renewals as at 1 January 2019 the group therefore expects – despite the overabundance of reinsurance capacity – stable prices and conditions for the most part. Similarly, an industry-wide softening in profitability as well as a higher burden of attritional losses point to a need for improved market conditions.
"The positive future prospects for the global reinsurance market are the cornerstone of our success over the medium and long term. With this in mind, we are concentrating quite deliberately on the products and services typically associated with a reinsurer", Wallin asserted.
"We have no doubt that this is the right course to pursue when it comes to generating sustainable value for our clients, our shareholders and our employees."
As has been apparent from the renewals over the course of the year, broadly diversified reinsurers with expertise and a very good rating are able to profit from the current state of the market.
Hannover Re has been highly satisfied with the business renewed to date in 2018. Looking ahead to 2019, further promising possibilities should open up. Along with the opportunities arising out of digitalisation, demand for coverage of cyber risks – not just from large corporations but now also from SMEs – is on the rise.
Similarly, business in the Asian growth markets (China, India) should also present some openings. Structured reinsurance offers further scope for growth in covers taken out for capital relief as a consequence of the implementation of risk-based solvency systems.